Apple’s China syndrome 

While Apple remains the world’s most valuable company, there are signs it is losing some of its lustre. Its global revenue rose by only 7 per cent year-on-year in the three months to July, with unit sales of its marquee product, the iPhone, up by just 2 per cent.
The story is even worse in China, the only market where Apple’s revenues dipped, with the 10 per cent fall representing the sixth straight quarter of decline. The iPhone’s share of the Chinese smartphone market has been slipping steadily and while it remains popular with the country’s wealthiest consumers, loyalty in other consumer segments is waning. 
Many analysts point to a clear reason for this weakening performance — China’s pre-eminent social media platform, WeChat. Some go further, suggesting WeChat is iPhone’s greatest rival in China. I have previously written about WeChat’s success but it is worth restating what makes it so powerful: WeChat is much more than a social media or instant-messaging app. It includes those features but they are merely parts of a much bigger universe. Its ever-expanding range of services includes messaging, video calls, games, e-commerce, financial transactions and the ability to book taxis and medical appointments. 
This ability to connect with people, solve problems and add value has resulted in a stellar performance – the platform currently boasts one billion subscribers who on average spend one-third of their smartphone usage time in the app.
More importantly, WeChat is not developing within a vacuum. It is part of an evolutionary software universe populated by many powerful players who no longer consider hardware to be the driving force of innovation. These players benefit from the fact that many people in China started engaging online through their mobile handset rather than with a PC. Mobile penetration is about 99 per cent, or 1.4 billion subscribers. Smartphone usage passed the 50 per cent mark last December, meaning half of China now accesses the Internet from their mobile device. This is an important milestone given the overall Internet penetration in the country is just 54 per cent. 
The realities of the China market are providing fertile ground for a potentially global new wave of digital disruption. App ecosystems such as WeChat are becoming increasingly powerful and we should only expect more of the same. There is the potential to use mobile Internet to connect the more than 700 million people who currently remain offline. This untapped market is also likely to be more price-sensitive and therefore seeks handsets that are much cheaper than anything Apple offers. Even wealthier consumers may question why they should spend more than $1,000 on a handset when they, and more importantly most of their friends and family, spend a significant part of their smartphone time within one app’s ecosystem.
While Apple may be at the sharp end of these trends, WeChat and its peers have the potential to transform the world of smartphones as we know it. Manufacturers of high-end handsets might be the first to tumble, but this revolution has the potential to redefine the meaning of connected devices – with China the first battleground.